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Heat boosts El Paso Electric's Q3 sales, profit

Vic Kolenc, El Paso Times
Published 5:06 p.m. MT Nov. 4, 2015

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Pete Flores, superintendent of El Paso Electric's Montana Power Station, viewed monitors in the power plant's control room. The electric company is seeking a rate increase in New Mexico and El Paso.(Photo: VICTOR CALZADA/EL PASO TIMES FILE PHOTO)Buy Photo

An extremely hot summer boosted El Paso Electric's sales and profit in the third quarter, the company reported Wednesday.

The company had a profit of $56.7 million in the third quarter, an increase of almost $4.3 million, or up 8.1 percent, compared to the same quarter a year ago.

The utility had record electricity sales in its El Paso-Las Cruces service area in the July-September quarter, and it set a new, one-day record for electricity generation on Aug.6.

The second-hottest summer in the company's service area in 20 years was the primary driver for the company's strong quarter in sales and profit, Nathan Hirschi, the company's chief financial officer, told Wall Street analysts during a conference call Wednesday.

Tom Shockley, El Paso Electric chief executive officer, said after the conference call that "it's always nice to have a nice quarter," but, he said, that doesn't mean the utility doesn't need the rate increases it's now seeking in Texas and New Mexico.

"When it's hotter, our earnings are better. We also suffer through years when the weather is not as good (for electric sales. It kind of balances out," Shockley said.

The company has invested almost $1.3 billion in new power generation and other improvements since 2009, and rates need to be increased to help pay those costs, he said.

"We have to make sure we set rates appropriately, so in an average (weather) year, we (get) a fair return on our investments" for the company's shareholders, he said.

Hirschi said summer is when the company sells the largest amount of electricity, and that historically makes the third quarter its strongest quarter of the year for earnings. But, he said after the conference call, upcoming quarters will be more challenging for the company because of Montana power plant construction costs and the lag time before new rates are approved by regulators.

The utility's third-quarter sales to customers increased 7.7 percent to $197.6 million. Out of that total, sales to residential customers increased almost 12 percent to $90.8 million.

The only sales category to decline was sales to electric buyers outside the utility's system, or so-called off-system sales. Those sales declined 25 percent from a year ago to $20.8 million. The decline was due to a drop in natural gas prices, which allowed power users to find better deals on electricity in the open market, Hirschi said. El Paso Electric customers get the bulk of off-system sales' profits through reduced fuel charges. That shared profit totaled $2.4 million in the third quarter.

Wednesday's earnings report was the last one that Shockley will participate in as CEO. He is retiring Dec. 15, when he will be replaced by Mary Kipp. She was promoted about a year ago to the utility's president and Shockley's successor. Shockley, a 45-year veteran of the electric utility industry, plans to remain on the company's board of directors.

More information: epelectric.com

Vic Kolenc may be reached at vkolenc@elpasotimes.com; 546-6421; @vickolenc on Twitter.